Last week the Treasury Department released the monthly TICC data for June 2008. The Treasury releases updated TICC data the 15th of every month for the month ended 6 weeks prior. Click here to access the data.

During the 3 months ended June 2008, foreign private investors sold a net of $13.6B of US stocks. Why is this a good sign? While I'll be the first to admit my market timing is far from perfect, the historical timing of US stock purchases and sales by foreign private investors is pretty dismal.

"You know what have we learned here today? Perhaps it's that no one can take your mojo." -Jerry Springer (playing himself) to Austin Powers (played by Mike Myers), The Spy Who Shagged Me (New Line Cinema 1999)

The Russell 2000 is very close to registering its second consecutive higher rally high. This impending second consecutive higher rally high solidifies my contention, as stated in a previous post, that small cap stocks are in an uptrend which traces its genesis to the March 17th lower pullback low.

If you would have told me that NYSE margin debt would be down >5% month-over-month March to April, I would have guessed that the market would be down by at least that much.

I haven't read or heard anything saying that either the Fed has raised margin requirements or that brokerage firms are making it harder for their customers to access margins. I've seen some articles which suggest anecdotally that hedge funds are dialing back their margin levels but I'm not sure whether hedgie margins are included in the NYSE data.

With the higher closing highs achieved recently in the S&P 500, the Dow Industrials and the Nasdaq and the Dow Theory buy signal, one must assume a new uptrend is in place.

While we never quite achieved bear market territory on a closing basis in the "Big 3" indexes, we were definitely in a downtrend and had reached bear market territory on an intra-day basis. Also, small caps (most of my portfolio) as measured by the Russell 2000 were well into bear territory on both a closing and intra-day basis.

"The bend in the road is not the end of the road unless you refuse to take the turn." ~ Anonymous

Merrill Lynch and Citigroup report their most recent quarterly earnings (and their writedowns) this Thursday and Friday, respectively. Earnings season and options expiration week make for a volatile mix. Expect Mssrs. Thain and Pandit to blow the top off this powder keg. I know I would.

I was almost 100% in cash going into the July 2007 highs as I sensed the market was running out of momentum. Tired of getting whipsawed, I have gritted my teeth and progressively upped my long exposure since the August selling stampede rather than continuing to buy and get stopped out.

Back in November, I wrote on the subject of the NYSE Margin Debt levels. The raw data can be found here.

Mr. Dow looked to the industrials and the rails to confirm each other in order to provide buy/sell signals and to confirm up/down trends. For purposes of analyzing Dow Theory, we now look to the Dow Jones Industrial Average and the Dow Jones Transportation Average.

Everyone takes a beating sometimes.

Ray Liotta's character Henry Hill in the movie 'Goodfellas'

I'm tired of taking a beating at the hands of the stock market these last few months. Although I've outperformed all indexes on a relative basis, my goal is absolute return. My gut tells me that I'm looking to hedge so the mid-January bottoms will hold here, making the last few days a successful retest. But, my mind and my models tell me otherwise.

While my most recent market outlook states that demand is in control and must be given the benefit of the doubt and that still remains the case as of the writing of this post, the NYSE Bullish Percentage is very close to signaling a reversal in favor of selling pressure. In fact, another day like Tuesday, and the reversal will have taken place. On February 28, 2008 the NYSE internals were >2:1 decliners to advancers and down volume to up volume, while the next day, decliners to advancers and down volume to up volume were >6:1. Two consecutive days such as these typically herald the beginning of 17 to 27 trading session selling stampedes. The beginnings of selling stampedes tend to take place near reversals to selling pressure being in control of the NYSE Bullish Percentage.

Just when I feel like I'm finally in sync with the markets, the last 2 days of February happen. The process of making a bottom was a rather long and tortured affair and perhaps I'm mistaken to refer to it in past tense. By my count and as measured by the S&P, we experienced 3 distinct selling stampedes after reaching an all-time high on 07.13.07; first from 07.20.07 to 08.16.07, second from 10.15.07 to 11.26.07 and lastly from 12.14.07 to 01.22.08. The penultimate and the ultimate days of February where, respectively, market internals were >2:1 and >6:1 decliners to advancers and down volume to up volume could signal the beginning of a new 17 to 27 trading session selling stampede.

A secondary indicator that I watch is the S&P 500 Commitment of Traders [COT] report. I used to think that it was bullish if commercial traders (the so-called 'Smart Money') were net long S&P futures and bearish if they were net short. Having analyzed a subset of the data, I'm no longer so sure. In fact, it appears to me that the opposite is the case; I should be bullish when commercial traders are net short and bearish when they are net long. I have analyzed the COT data going back to the January 2004 and found that commercial traders were, with the exception of a handful of weeks (7 to be exact), net short the S&P futures from January 2004 through April of 2007. During this same period in time the S&P index itself advanced from 1,123 to 1,486, a rise of ~32.3%. By contrast, while commercial traders have been predominantly net long since May 2007 with the exception of 3 weeks, the S&P index has been flat, moving from 1,486 to 1,496 as of December 28th.

I used to think that the COT data represented commercial trader's speculative positions in the market. Now I'm beginning to come around to the point of view that the COT data represents a partial hedge of commercial trader's true positions, hence the inverse relationship between commercial trader's net position and the performance of the S&P. I have the COT data going back to 1994 and will have to make some time in the near future to see if the relationship I think I've discovered holds over a longer timeframe.